Yes, you can I get a site at /blog running in MULTISITE, but that needs adding some code. That's because WordPress has a child-proof lock build in that you need to unlock first. This can be done by adding a hook function into the subdirectory_reserved_names filter that passes an array with names that are blocked as parameter. Remove the entries you'd like to use and return the filtered array.

Take care because this child-proof lock has been build so that the words 'page', 'comments', 'blog', 'files', 'feed' could not be used by default. /blog for example is reserved for the main site.

For more information please see ticket #13304, the related change that allows to override the reserved names was 14928

There is a way, I have done it before but it was on WPMU 2.X - not sure if they made it tougher to remove in 3, I can't imagine why they would have.

this is a plugin to remove the /blog part - http://buddydev.com/http//buddydev.com/public-download/cc-remove-blog-slug-v-1.1.zip - as for writing the actual /blog/ permalink to the site, wp will filter that, the easies way is create the "blog" subsite with a wierd enough url that it is quickly found in phpMyAdmin (set the path to "yoursite.com/wtfisgoingonhere") then log intop phpmyadmin search for it, and replace all instances with /blog/ - be very careful not to remove or add an extra slash anywhere. Good luck!